Fiscal Landscape of Odisha: An analysis of Deficits and Expenditures

This paper examines the paradigm shift of the fiscal landscape of Odisha during the period spanning from 1980–81 to 2014–15. To analyse the structural changes, the entire period is further split into four sub-periods i.e., 1980–81 to 1989–90, 1990–91 to 1999–2000, 2000–01 to 2004–05 and 2005–06 to 2014–15. The fiscal deterioration of the first sub period was mainly because of a worsening revenue account. During sub period two, further deterioration in the revenue account was coupled with deterioration in capital account. This led to a higher fiscal deficit and high debt burden ratio. As a result, the capital outlay was compressed. In sub period three, the State decided for a comprehensive reform in state finance by signing an MOU with central Government and in accordance with the 11th Finance Commission recommendation. The immediate policy measure of the State had been to reduce the burden of interest payment through prepayment of high cost market borrowing and also through debt swap. In sub period four, the introduction of Odisha Fiscal Responsibility and Budget Management (FRBM) Act, 2005 provided a rule based framework for the administration of the Fiscal Consolidation process in Odisha. The FRBM Act, 2005 and the recommendation from the successive finance commissions, collectively guided state finance in Odisha to a turnaround through efficient expenditure management policy that led to creation of more fiscal space and flexibility by 2014–15.